Working Capital Calculator
Estimate how much cash is tied up in receivables, inventory, and payables. Use this tool to understand how operations affect liquidity.
Calculate working capital
What is working capital?
Working capital is the amount of cash tied up in the operating cycle of a business. In simple terms, it shows how much money is sitting in receivables and inventory, net of what the business owes suppliers.
A business can be profitable on paper and still feel cash-starved if too much capital is trapped in slow receivables, excess inventory, or poor payment timing.
Formulas
- Net Working Capital = Accounts Receivable + Inventory − Accounts Payable
- Operating Assets = Accounts Receivable + Inventory
- Days Sales Outstanding = Accounts Receivable ÷ Daily Revenue
- Days Inventory Outstanding = Inventory ÷ Daily COGS
- Days Payable Outstanding = Accounts Payable ÷ Daily COGS
- Cash Conversion Cycle = DSO + DIO − DPO
Example
Assume a business has $125,000 in receivables, $175,000 in inventory, and $85,000 in payables.
Net working capital is $215,000. That means $215,000 of cash is effectively tied up in the operating cycle before considering cash already sitting in the bank.
For an owner-operator, this matters because growth often consumes cash before it produces cash. More sales may require more inventory, more labor, and more receivables before the money is actually collected.
Common mistakes
- Assuming profit and cash flow are the same thing.
- Growing revenue without estimating the cash required to support growth.
- Letting receivables stretch while still paying suppliers quickly.
- Buying inventory too far ahead of demand.
- Ignoring the cash conversion cycle when evaluating acquisitions.
Start with the Core Frameworks.
Approach is best experienced through its core frameworks. Begin with the five foundational frameworks that establish the philosophy behind every operating decision, note, and calculator on the site.
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